State-run Bank of Baroda (BoB) has cut term deposit rates by 15 basis points for deposits maturing between one and three years and by 25 basis points (bps) for deposits maturing after five years.
With ample liquidity but limited avenues for deployment in the absence of demand for loans, banks are looking to lower their cost of funds.
BoB says it may consider a cut in rates soon. “There is some anticipation that the governor will also cut interest rates. But we will not wait for it.
We will take an independent decision based on market scenario,” said Ranjan Dhawan, executive director, Bank of Baroda, explaining the bank’s stance on base rate reduction.With inflation remaining subdued, the Reserve Bank of India(RBI) is expected to reduce interest rates early February.
With effect from January 1, 2015, BoB will offer a deposit rate of 8.75% for deposits maturing between one and three years against 8.90% earlier. For deposits above five years, BoB will offer 8.50% against 8.75% earlier.
“We feel that rates are softening in the industry. For last several months we have seen the yields on advances go down and therefore we thought that it would be appropriate at this time to cut deposit rates,” said Dhawan.
BoB had earlier trimmed its deposit rates in early October by 15-30 bps for deposits having maturities of one year and above.
Allahabad Bank also trimmed its term deposit rates by 15 bps to 8.75% for deposits of less than one crore ranging from one year to less than five years, effective Wednesday.
Following deposit rate cuts by HDFC bank, ICICI bank and State Bank of India, a slew of rate cuts were seen since early December. ICICI Bank and HDFC Bank trimmed their fixed deposit rates below R1 crore by 25 bps and 25-50 bps, respectively, in select maturities while SBI had lowered deposit rates by 25 bps to 8.5% for deposits maturing between one and three years.
Among public sector banks, Canara Bank and Punjab National Bank offer the highest rate of interest at 9% on fixed deposits maturing between one and two years.